Last June, a client named Sarah, a 45-year-old ER nurse, told me, “I feel like I’m running on a financial treadmill and the ‘off’ button is broken.” She was saving aggressively but had no real strategy. Her fear wasn’t about a number; it was about running out of time.
The dirty secret of retirement planning is that simply saving more isn’t the answer.
The real threat is sequence of returns risk. A major market downturn in the first few years after you retire can cripple your portfolio permanently. This guide isn’t about building a bigger savings account. It’s about building a financial fortress for that exact storm.
The real question is: are you building a plan for retirement, or just a pile of cash? Well, from almost 3 decades of experience, I’ve got a 5 step retirement planning guide for you.
Key Takeaways Ahead
Step 1: Define Your Retirement Vision & Calculate Your Number
Before you can save a penny, you need to know what you’re saving for. I always asked my clients a simple but powerful question:
At what age would you like to make going into work optional?
This reframes retirement not as an end, but as the beginning of financial freedom.
Once you have a vision, you need a retirement target.
Every new client wants to know their “retirement number.” The internet screams “$2 million!” and offers up the 25x Rule as gospel.
Let’s be brutally honest: it’s a blunt instrument, a Day 1 estimate at best. I’ve seen clients hit their “$1.6M” goal and still feel insecure, because the 25x Rule dangerously ignores healthcare shocks, inflation spikes, and taxes.
My prediction for 2026: reliance on static models like this will fade in favor of dynamic income modeling, which stress-tests your plan against real-world chaos. Instead of asking “what’s my number?”, start asking “how durable is my income stream?“.
🔍 Explained Simply: How to Use the 25x Rule as a Starting Point
To get a rough estimate, first calculate 80% of your current annual income (e.g., $80,000 x 0.80 = $64,000). Then, multiply that by 25 ($64,000 x 25 = $1.6 million). This is your initial savings target, but we’ll refine it with real-world data in the steps below.
After this step, I highly recommend using an interactive tool like our Saving for Retirement Calculator to get a more personalized projection.
Step 2: Build Your Retirement Toolbox with the Right Accounts
Now that you have a target for your retirement, you need the right tools to get there. Retirement accounts are your financial toolbox, offering powerful tax advantages that accelerate your savings.
The “Big Three” Retirement Accounts for 2025
Here’s a quick rundown of your main options, with updated 2025 contribution limits from the IRS.
| Account Type | 2025 Contribution Limit | Key Feature | Best For |
|---|---|---|---|
| 401(k) / 403(b) | $23,500 (+$7,500 catch-up if 50+) | Employer-sponsored with a potential company match. Pre-tax contributions lower your current income tax. | Anyone with an employer who offers a plan, especially with a match. |
| Traditional IRA | $7,000 (+$1,000 catch-up if 50+) | Contributions may be tax-deductible. Money grows tax-deferred until retirement. | Individuals who want an additional tax deduction now or don’t have a workplace plan. |
| Roth IRA | $7,000 (+$1,000 catch-up if 50+) | After-tax contributions allow for tax-free growth and 100% tax-free withdrawals in retirement. | Savers who anticipate being in a higher tax bracket in retirement. Learn more about a **[Roth Contributory IRA here](https://michaelryanmoney.com/roth-contributory-ira/)**. |
💡 Michael Ryan Money Tip: The “Free Money” Rule
If your employer offers a 401(k) match, you must contribute at least enough to get the full amount. For example, if they offer a 100% match on contributions up to 6% of your salary, contributing 6% gives you an immediate 100% return on your investment. It’s the closest thing to free money you will ever find.
The “Super” Catch-Up Contribution for 2025
Thanks to the SECURE 2.0 Act, a new rule takes effect in 2025. According to Charles Schwab, workers aged 60 to 63 can make a “super” catch-up contribution to their 401(k) of up to $11,250, for a total possible contribution of $34,750.
Step 3: Create a Simple, Powerful Investment Strategy
Once you’ve chosen your accounts, you need to decide how to invest the money inside them. Investing isn’t just for Wall Street hotshots; a simple, disciplined approach is all you need.
The golden rule is diversification for retirees. Don’t put all your eggs in one basket. The easiest way to achieve this is through asset allocation. Mixing different types of investments, primarily stocks and bonds.
- Stocks: Represent ownership in a company. They offer higher potential growth but come with higher risk.
- Bonds: Are essentially loans to a government or corporation. They offer more stability and lower returns.
🔍 Explained Simply: The Easiest Way to Invest
For most people, the best tools are low-cost **index funds** or **target-date funds**. An index fund buys all the stocks in an index (like the S&P 500), giving you instant diversification. A target-date fund automatically adjusts your asset allocation to become more conservative as you approach your retirement date. It’s like having your investment strategy on autopilot.
I once had a client who was brilliant, a literal rocket scientist. But he was paralyzed by investment choices. He had 15 different funds. We finally simplified his portfolio to just two. A global index fund and a bond fund. His returns improved because he stopped making emotional decisions.
Simplicity is its own form of genius.“
Step 4: Master Your Big-Ticket Items: Healthcare & Social Security
A great savings plan can be quickly derailed by two massive expenses in retirement: healthcare and taxes on Social Security.
Planning for Healthcare Costs in Retirement
Brace yourself: Fidelity estimates a 65-year-old couple may need approximately $315,000 saved (after tax) to cover healthcare expenses in retirement.
A Health Savings Account (HSA) is the ultimate tool to combat this. If you have a high-deductible health plan, you can contribute to an HSA, which offers a triple tax advantage: contributions are tax-deductible, the money grows tax-free, and withdrawals for medical expenses are tax-free.
Maximizing Social Security Benefits
When you claim Social Security is one of the most critical decisions you’ll make. Waiting until age 70 can increase your lifetime benefits by over $100,000 compared to claiming early at 62.
For a deep dive, consult the Social Security Administration’s own resources on delayed retirement credits.
Step 5: Design a Sustainable Withdrawal Plan
You’ve spent a lifetime saving; now it’s time to create a “personal pension” from your nest egg. The famous 4% Rule is a good starting point, but modern research from sources like Morningstar shows that a dynamic approach is often better.
📘 Client War Story: Surviving a Market Crash
I had a client who retired in late 2007, right before the financial crisis. We had implemented my **”3-Bucket Liquidity Shield”**: Bucket 1 had 2 years of expenses in cash, Bucket 2 had 5-7 years in bonds, and Bucket 3 held his long-term stocks. During the 2008-2009 crash, he lived entirely off his cash and bond buckets. He didn’t have to sell a single stock at the bottom, allowing his portfolio to fully recover and thrive. That strategy didn’t just save his money; it saved his retirement.
Frequently Asked Questions About Retirement Planning
Is it ever too late to start saving for retirement?
No. While starting early is ideal due to compound interest, it’s never too late. The tax advantages and catch-up contributions available later in your career are powerful tools to help you make significant progress.
What if I’m self-employed?
You have excellent options! A SEP IRA or Solo 401(k) allows you to save a much larger portion of your income than a traditional IRA.
How often should I review my retirement plan?
You should review your plan at least once a year or after any major life event, like a marriage, a new job, or the birth of a child.
Your Roadmap to a Rock-Solid Retirement
Retirement planning isn’t a one-and-done deal; it’s an ongoing journey. By following these steps—calculating your needs, choosing the right accounts, investing simply, and planning for the big expenses—you can turn anxiety into action. Your dream retirement is within reach.
Ready to get started? Download my free “5-Step Retirement Plan Checklist” to begin your journey and track your progress toward a secure and fulfilling future.
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Note: The content provided in this article is for informational purposes only and should not be considered as financial or legal advice. Consult with a professional advisor or accountant for personalized guidance.
